For most people, social security benefits are an important source of income after retirement. Depending on how many years you have to claim this benefit, you should know how much to expect and how you can maximize your benefits.

Knowing how social security benefits are calculated can help you plan for the future. It is estimated that at least nine out of 10 Americans who are 65 years and older receive social security payments. Moreover, 57 percent of retirees say that social security is their primary source of income.1

What Are Social Security Benefits?

Social security is a self-supporting federal program that is financed with payroll taxes. It provides retirement income and other insurance programs to retirees, disabled persons, and their dependents. Individuals must pay social security taxes to the program during their working years and accumulate enough credits to qualify for the benefits after retirement.

Individuals must have accumulated at least 40 credits to receive the benefits. The Social Security Administration (SSA) awards four credits annually. Individuals must have at least 10 working years to attain the required credits.2

Determining Your Social Security Benefits

When calculating social security benefits, the SSA uses 35 of the highest-earning years to determine the average monthly benefits. While it is possible to get the monthly benefits after 10 years of working, your average earnings will be lower since the SSA uses the top 35 years of earnings to determine average earnings.

If you worked for 35 years and over, SSA selects the highest years of earnings and drops the lowest years of earnings from the calculation. If you worked for 25 years, the average will include 10 years of zero earnings, which will significantly reduce the monthly average benefits you can get.

Generally, working for longer than 35 years can increase the social security benefits you receive, especially if your income is significantly higher now than it was in your early working years.3

How Retirement Age Affects Your Social Security Benefits

Your age when you claim social security benefits determines the amount of payments you receive from the SSA. Claiming the benefits before attaining full retirement age results in lower earnings. In contrast, individuals who delay claiming the benefits after attaining the full retirement age receive higher monthly payouts.

The full retirement age ranges from 65 to 67, depending on your birth year. For example, those born after 1954 have a retirement age of 66 years, while those born in 1960 or later have a retirement age of 67. The earliest you can claim social security benefits is at 62 years, which could reduce the monthly check by up to 30 percent.4

If you have the desire and capacity to work after attaining the full retirement age, you can delay claiming social security benefits to increase your benefits by 25 percent or higher. For each year you delay taking benefits, your principal insurance amount increases by up to eight percent depending on your birth year.5

Earning Spousal Benefits on Social Security

If you are married, you might be eligible to collect up to 50 percent of your spouse’s benefits. However, there are certain rules that married people must meet to collect this benefit.

If you are currently married, your union must have lasted at least one year to claim the spousal benefit. If you are divorced and currently unmarried, your marriage must have lasted at least 10 years to claim the benefit.

If your spouse is receiving social security payments, you can claim spousal benefits, regardless of whether your work record qualifies for social security benefits. If you are also receiving benefits but your spouse’s benefits are higher than your payments, claiming spousal benefits can allow you to claim the higher spousal benefit.

Social security also allows widows and widowers to claim social security benefits of their deceased spouses. They qualify to receive reduced benefits at 60 years. However, waiting until they attain the full retirement age can help them get higher benefits. If the survivor is eligible to receive benefits on their work record and the benefits are higher than the survivor benefits, they can switch over to their retirement benefits at 62 years.6

How to Maximize Social Security Benefits

Social security guarantees a steady income in your golden years. There are certain strategies that you can use to increase your social security benefits to boost your financial security.

Consistent Earning History

The SSA considers 35 of your highest-earning years to determine your average monthly benefits. If you have fewer working years, the SSA will use zero as one of the numbers for the periods you don’t have an income. This significantly affects your average monthly payments.7

Work on building at least 35 years of consistent working history with minimal zero earning months.

Delay Benefits Until 70

If you delay in claiming benefits after attaining the full retirement age, you will earn delayed retirement credits that may boost your monthly payments.

For each year you delay in claiming benefits, the social security benefits increase by eight percent. The increased benefit is a form of compensation for the years you did not receive your social security benefits.

Limit Your Taxes

Depending on your total annual income, the social security benefits may be taxable. If your combined income of interests, dividends, wages, pension, and other taxable incomes, and half of the social security benefit exceeds a base amount, the social security benefits will be taxed at 50 to 85 percent. The tax limit for single filers is $25,000 to $34,000, and $32,000 and 44,000 for married filing jointly.

If the combined income exceeds the upper limits of the tax limits, you could pay tax on up to 85 percent of your social security benefits. Spreading out other forms of income over several years instead of receiving them as one lump sum can help reduce or eliminate the tax you pay on your social security benefit.8

Claim Spousal Benefit Now and Postpone Claiming Yours

This strategy allows you to claim spousal benefits now, while your benefits keep growing. However, only people born on January 2, 1954 or earlier can use this option. To claim spousal benefits, the spouse must have filled their social security benefits. Ex-spouses are exempted from this requirement.

Gallup, Social Security 2
Social Security Administration, Retirement Benefits 3
Social Security Administration, Learn About Retirement Benefits, 4
The Motley Fool, Full Retirement Age for Getting Social Security 5
Social Security Administration, Delayed Retirement Credits 6
The Balance, Social Security Spousal Benefits Explained 7
Social Security Administration, Social Security Benefit Amounts 8
SmartAsset, Is Social Security Income Taxable?